Glucocorticoids regulate the transcription of rDNA in lymphosarcoma P1798 cells in culture. Sixteen-hour treatment with 0.1 micromolar dexamethasone causes 95% inhibition of synthesis of pre-rRNA in intact cells and a corresponding decrease in the rate of initiation upon the cloned mouse rRNA promoter and upon nucleolar chromatin. This does not result from a direct interaction between the glucocorticoid receptor and the gene. Rather, glucocorticoids regulate the expression of one or more transcription initiation factors. A partially purified initiation factor from control cells is capable of reconstituting transcription of the cloned rRNA promoter. This factor is not required for the formation of stable pre-initiation complexes. Extracts from control and hormone-treated cells are capable of forming approximately 10 mol of pre-initiation complex/microliter of extract. In control extracts, the pre-initiation complex is converted to a heparin-resistant initiation complex at a rate of about 2x mol/sec, and the calculated rate of elongation from such initiation complexes approximates the rate of elongation determined upon homopolymerically tailed templates (approximately 25 nt/sec). Formation of heparin-resistant initiation complexes does not occur at a detectable rate in extracts from hormone-treated cells. However, the rate of elongation by RNA polymerase I from hormone-treated cells is approximately 25 nt/sec on homopolymerically tailed templates. Our working hypothesis is that transcription of cloned rDNA proceeds by a two-step reaction. The first reaction involves the formation of stable pre-initiation complexes and proceeds at a rate that is at least an order of magnitude slower than the steady state rate of transcription. Under steady state conditions, the rate of transcription is limited by the amount of a protein(s) that is required for formation of heparinresistant initiation complexes. This protein is subject to regulation by glucocorticoids in lymphosarcoma cells. (C)